Item 8.01. Other Events
On September 18, 2020, Eagle Materials Inc., a Delaware corporation (the
"Company"), sold its Oil and Gas Proppants business (the "Proppants Business")
to Smart Sand, Inc., a Delaware corporation (the "Purchaser"), pursuant to an
Equity Purchase and Sale Agreement (the "Purchase Agreement") between the
Company and the Purchaser. As previously reported, prior to the sale
transaction, the Company had taken steps to curtail operations of the Proppants
Business due to, among other things, adverse market conditions. After giving
effect to the sale contemplated by the Purchase Agreement, the Company will no
longer be engaged in the Proppants Business.
The purchase price (the "Purchase Price") paid by the Purchaser for the
acquisition of the Proppants Business was $2,000,000, paid in shares of common
stock of the Purchaser valued at an agreed price per share of $1.33. The
Purchase Price is subject to certain customary post-closing adjustments as
provided in the Purchase Agreement. The shares delivered to the Company by the
Purchaser are not registered under federal or state securities laws, and
accordingly, the resale thereof is subject to restrictions under such laws. A
portion of the Purchase Price was placed into escrow to secure certain of the
Company's indemnification obligations.
The Purchase Agreement contains customary representations, warranties and
covenants, as well as indemnification provisions, which are subject to specified
limitations. The indemnification provided by the Company under the Purchase
Agreement covers breaches of representations, warranties and covenants along
with assets and liabilities retained by the Company. In connection with the
execution of the Purchase Agreement, the Company also entered into a Loan and
Security Agreement, dated September 18, 2020 (the "Loan and Security
Agreement"), by and among the Company, as lender, the Purchaser, as borrower,
and other parties thereto. Pursuant to the Loan and Security Agreement, the
Company will loan up to $5,000,000 to the Purchaser for working capital and
operating, maintenance, and administrative expenses of the Proppants Business
during the one-year period following the Closing. Up to 50% of the amounts
outstanding under the Loan and Security Agreement may be repaid by the Purchaser
in shares of the Purchaser's common stock. Borrowings under the Loan and
Security Agreement will bear interest at a fixed rate of 6.00% per annum during
the one-year period following the Closing and any amounts not repaid one year
following the Closing will bear interest at a fixed rate of 8.00% per annum and
will mature on September 18, 2024.
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